CGS International
Report Date: September 23, 2025

Keppel DC REIT Accelerates Asia-Pacific Growth with Major Japan Data Centre Acquisition: A Comprehensive REIT Sector Analysis

Introduction: CGS International’s Strategic Review of Keppel DC REIT and its Peers

Keppel DC REIT (KDCREIT), a leading Singapore REIT specializing in data centres, has announced a transformative acquisition that deepens its exposure in Japan and signals robust portfolio growth. This report, prepared by CGS International, delivers an in-depth analysis of KDCREIT’s growth trajectory, financial outlook, and sector positioning, while benchmarking the trust against its industry peers across hospitality, industrial, office, retail, overseas-centric, and healthcare segments.

Keppel DC REIT’s Strategic Leap: Acquisition of Tokyo DC 3

KDCREIT has unveiled a landmark agreement to acquire a 98.47% stake in a newly completed, top-tier hyperscale data centre in Tokyo—Tokyo DC 3—for S$696.1 million (100% basis: S$707 million). Strategically located in Inzai City, one of Japan’s most prominent data centre clusters, Tokyo DC 3 boasts Tier III equivalent specifications, seismic base isolation, and a 15-year lease with a Fortune Global 500 hyperscaler, with an option to renew for five more years. This long-term anchor tenancy is expected to bolster KDCREIT’s portfolio stability and boost its recurring income. The transaction is scheduled for completion by the end of 2025.

Portfolio Impact: Rising Occupancy, Stronger Lease Profile, and Geographic Diversification

Portfolio occupancy is forecast to climb to 95.9% post-transaction.
Weighted Average Lease Expiry (WALE) will extend to 7.2 years, reinforcing income visibility.
Asia-Pacific will constitute 83.4% of portfolio asset value after the acquisition, with Singapore at 57.7%, Japan at 16.4%, China at 4.6%, and Australia at 4.4%. European assets will make up the remaining 16.6% (Ireland, Germany, UK, Italy, Netherlands).
The trust’s financial flexibility remains intact, with post-acquisition gearing at a moderate 33.5%.

Funding Structure: Debt and Preferential Offering

To finance the S$708.3 million total outlay for the Tokyo DC 3 acquisition, KDCREIT will employ a balanced mix of debt and equity:
S$404.5 million will be raised through a preferential offering—80 new units for every 1,000 existing units at S$2.24 per unit.
Proceeds will fund the Tokyo DC 3 acquisition (S$229.8m), asset enhancement at KDC SGP 8 (S$53.9m), a 30-year lease extension at KDC SGP 1 (S$10.7m), debt repayment (S$104.5m), and other strategic expenses.
Management estimates distributable per unit (DPU) accretion of 2.8% from the acquisition, with asset enhancement initiatives at KDC SGP 8 contributing an additional 0.6% to DPU.

Financial Performance and Projections

Key highlights:
Revenue is projected to increase steadily, with a notable jump post-acquisition in 2025.
Dividend yields are set to improve, supporting attractive returns for unitholders.
Asset leverage remains conservative, supporting future growth flexibility.

ESG Performance and Sustainability Commitments

KDCREIT scored a B- in the LSEG ESG assessment for 2024, with strong marks in governance (B) and minimal ESG controversies (A+). The trust remains committed to halving combined Scope 1 and 2 emissions by 2030 (from a 2019 baseline), rolling out renewable energy to over half of its colocation assets, and achieving green certification for all such assets by 2030.
Additional ESG progress includes:
15.5% year-on-year reduction in Scopes 1, 2, and 3 emissions in 2024.
12% decline in energy consumption and 7.5% reduction in water withdrawal in 2024.
Introduction of green clauses for Singapore colocation data centres, with expansion plans overseas.
Over 1,100 hours dedicated to community outreach, well above target.

Peer Comparison: How KDCREIT Stacks Up Across the S-REIT Landscape

The report offers a robust comparative table across major REIT sub-sectors, highlighting dividend yields, asset leverage, price-to-book ratios, and market capitalization. Here’s a summary of key peer metrics:

Key Observations:
KDCREIT’s dividend yield is competitive within the industrial REIT segment, though trailing some higher-yielding peers.
Asset leverage remains prudent, supporting a robust balance sheet.
Price-to-book valuation is at a premium to many peers, reflecting quality and growth prospects.

Performance, Shareholding, and Market Metrics

Major shareholders: Keppel Corp Ltd (21.3%), Cohen & Steers (5.0%), Matthews International Capital Management (4.9%).
Free float: 76.5%
Price as of September 22, 2025: S$2.36; Target Price: S$2.48 (5.1% upside).
Performance: 1M absolute return 2.2%, 3M absolute 2.2%, 12M absolute 8.3%. Relative performance is softer over longer periods.

Risks and Catalysts

Potential Catalysts:
Earnings upside from improved tax transparency at key Singapore data centres.
Additional inorganic growth opportunities.
Resolution of arrears from Bluesea and better-than-expected rental reversions.
Risks:
Lower-than-forecast portfolio occupancy.
Weaker rental reversions due to macroeconomic headwinds.

Conclusion: Strategic Growth, Resilient Returns, and Sector Leadership

Keppel DC REIT’s acquisition of Tokyo DC 3 marks a pivotal step in its Asia-Pacific expansion strategy, enhancing portfolio resilience, income visibility, and long-term value for investors. Supported by prudent funding, strong ESG credentials, and a competitive yield profile, KDCREIT remains well-positioned among leading S-REITs. Investors should monitor completion milestones, sector developments, and ESG progress for further upside.
This comprehensive analysis, prepared by CGS International as of September 23, 2025, serves as an essential guide for financial professionals seeking deep insights into the evolving REIT landscape, with KDCREIT leading the charge in digital infrastructure and sustainable growth.